The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Years to Maturity Price (% of face value) 1 98.052% 2 94.551 3 90.744 4 86.680 What is the 1-year interest rate? What is the 3-year interest rate? What is the 4-year interest rate? Is the yield curve upward-sloping, downward-sloping, or flat? Is this the usual shape of the yield curve?
The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity. Years to Maturity Price (% of face value) 1 98.052% 2 94.551 3 90.744 4 86.680 What is the 1-year interest rate? What is the 3-year interest rate? What is the 4-year interest rate? Is the yield curve upward-sloping, downward-sloping, or flat? Is this the usual shape of the yield curve?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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The following table shows the prices of a sample of Treasury bonds, all of which have coupon rates of zero. Each bond makes a single payment at maturity.
|
Years to Maturity |
Price (% of face value) |
|
1 |
98.052% |
|
2 |
94.551 |
|
3 |
90.744 |
|
4 |
86.680 |
- What is the 1-year interest rate?
- What is the 3-year interest rate?
- What is the 4-year interest rate?
- Is the yield curve upward-sloping, downward-sloping, or flat?
- Is this the usual shape of the yield curve?
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